The condensed product-line income statement for Dinner Ware Company is as follows:

Dinner Ware Company

Product - Line Income Statement

Fixed costs are 40% of the cost of goods sold and 18% of the selling and administrative expenses. Dinner Ware assumes that fixed costs would not be significantly affected if the Cups line were discontinued.
a. Prepare a differential analysis report for all three products.
b. Should the Cups line be retained? Explain.

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Bowls Plates Cups Sales Cost of goods sold Gross profi Selling and administrative expenses Operating income (loss) 2,350,000 (1,400,000) $950,000 (700,000) 250,000 $1,500,000 975,000 (900,000) 600,000 (270,000) 330,000 (780,000) 195,000 (300,000) $(105